President of the European Council Herman Van Rompuy spoke Wednesday of the need to find a solution for the economic crisis in Cyprus, stressing that the uncertainty is highly damaging, especially for the people of Cyprus.
Rompuy, who was speaking before the European Parliament, said that the situation in Cyprus must be resolved urgently. The EC President was referring to the situation in Cyprus after the Cypriot Parliament rejected a bailout deal offered by the Eurogroup that involved a levy on individual bank deposits.
He expressed his concern over the situation on the island, saying that he closely follows developments.
In addition, Rompuy noted that the EU is ready to show its solidarity with a 10 billion euro deal and added that the EU is open to alternative solutions.
“The current, highly uncertain situation is highly damaging, especially for the people of Cyprus, and has to be addressed as soon as possible,” he stressed.
What is now important, Rompuy said, is to save Cyprus and the prosperity of the Cypriot people.
He also described the situation of the financial sector in Cyprus as “highly specific both in size and structure.”
Concluding, Rompuy assured that bank deposits of up to 100,000 are guaranteed.
The Cypriot House of Representatives rejected Tuesday a draft bill on Cyprus’ bailout agreement that provides for an unprecedented levy to be imposed on savings in Cyprus banks (haircut) with 36 votes against and 19 abstentions.
The Eurogroup reached last week an agreement in Brussels which provided for a levy on savings that stung small account holders to the tune of 6.75% in exchange for a €10 billion sovereign bailout deal, whereas deposits over 100.000 euro would be charged with a 9.9% levy. The agreement also included an increase in corporate tax from 10% to 12.5%.
Excluded from the international markets, Cyprus applied last June for financial assistance from the EU bailout mechanism, after its banks sought state support following massive write downs of the Greek bond holdings amounting to €2.5 billion or 25% of the island`s GDP, as result of the Greek sovereign debt haircut.
